December 26, 2011
Less than a month ago Robert Samuelson told readers that it was unreasonable to expect the Super Committee to solve the country’s deficit problem since the real issue is health care. He said that the Super Committee was not going to come up with a politically acceptable way to fix health care in three months so it was unrealistic to imagine that it would produce a solution to the long-run deficit problem.
His comments in today’s column suggest that he is unfamiliar with the piece he wrote last month. (Hot rumor: there are two Robert Samuelsons.) This one tells us that the problems are that the Republicans don’t want to raise taxes and the Democrats refuse to consider cuts in spending, therefore we are going to have a long-term budget problem that will lead to an enormous economic crisis.
Of course Samuelson’s column last month was completely right. We pay more than twice as much per person as the average for other wealthy countries. If we get out health care costs in line with other countries we would be looking at budget surpluses not deficits. (Trade would be a good place to start. Unfortunately, the Washington Post and other major media outlets are dominated by hard-core protectionists.)
There are a few other points worth hitting Samuelson on in this piece. First, if we get military spending back down to its pre-September 11th share of GGP (3.0 percent), it will go far towards getting our future deficits down to sustainable course. (This would imply a savings of roughly $2 trillion over the next decade, if the reduction took place immediately.)
Second, there is no obvious reason that the Fed cannot simply continue to hold the assets that it has purchased as part of its quantitative easing program indefinitely. This means that the interest on these assets is refunded to the Treasury and therefore does not add to the deficit. Last year the Fed refunded $80 billion to the Treasury.
Third, listing Social Security as a benefit that people are unwilling to pay for is simply absurd. Samuelson uses 1960 as a base point. In the last five decades the Social Security tax has more than doubled and the age for receiving normal benefits has risen from age 65 to 66. It is scheduled to rise 67 in another ten years. People clearing are willing to pay for their Social Security benefits and have been.
Finally, the idea that if we don’t get the deficit down something really bad is going to happen ignores the fact that something really bad is happening now. If someone had warned in 2007 that we face a prolonged downturn with an unemployment rate averaging over 9 percent for three years, they would have been ridiculed as a doomsayer. It is remarkable how easily Samuelson can ignore the disaster in front of his eyes, and would instead have us divert our attention to a vaguely defined really bad disaster in the indeterminate future.
Of course if the Post and other media outlets did not restrict their economic columns almost exclusively to people with no understanding of the economy, we might have been able to avoid the current disaster. After all, it does not take much economic sophistication to see an $8 trillion housing bubble, but the Post could not find anyone who rose to this level of knowledge.
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